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[Sponsored Report] Kumho Tire seeks to build greater brand value

Apr 06,2018

Kumho Tire accepted China’s Qingdao Doublestar’s offer of investment on April 1 after the tire maker’s labor union agreed to the plan to get the company back on track.

Doublestar promised to let an independent management team run Kumho Tire, adopting a system similar to Geely’s acquisition of Volvo in 2010 - the Chinese automaker bought Volvo and focused on injecting capital into the Swedish car manufacturer while allowing the management to maintain its independence in order to grow the brand.

The overseas investment allows Kumho Tire to keep its brand name in the global market and continue production and sales with a focus on enhancing its brand value. It also allows the Korean tire maker to continue its supply of original equipment tires (OET) - tires included with a newly manufactured vehicle - to global automakers without any disruption.

Above all, the investment is expected to significantly bolster Kumho’s finances. An initial capital injection will soon resolve Kumho’s liquidity crisis. Doublestar will invest capital through a rights issue - an issue of shares at a special price to an existing shareholder.

In addition, the creditors will lend additional capital to Kumho to allow it to build new facilities.

Kumho plans to use the newly-injected funds to expand research and production facilities in Korea. In particular, the company will focus on upgrading its production lines for eco-friendly tires in a bid to sharpen its edge in the highly competitive, technology-intensive market.

It also plans to make its tires more affordable by normalizing production in China and enhancing the quality of its products by improving its production lines in Korea and the rest of the world - a move that it believes will help build its brand value further.